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    12/14/2011

    PROJECT LEADER: PROF. HUSSAIN ALI

    BEKHET

    PROJECT ASSISTANT: TAHIRA YASMIN

    PROJECT DURATION: 3 YRS(2011-2014)

    STUDENT ID:PM 20326

    ASSIGNED BY: ASSOC. PROF. DR. VIGNAKUMARAN

    GREENING MALAYSIA: ENVIRONMENTAL EMISSION AND

    ECONOMIC DEVELOPMENT ANALYSISUSING AN INPUT-

    OUTPUT APPROACH

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    Table of Contents

    1. Introduction2. Objectives3. Literature Review4. Research Model

    4.1 Input-output Transaction Table4.2 Environmental input-output method

    5. Expected Result and benefits6. Cost Table7. Gantt Chart

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    1.Introduction

    The mankind are under serious threat of global warming, thus immediate actions are required

    to fight against it. Among of the most important measures are to reduce energy consumptions

    and carbon dioxide emissions. The world is facing the challenge of global warming and

    climate change issues. The anthropogenic driver of climate change is the increasing

    concentration of greenhouse gases (GHG) in the atmosphere. Carbon dioxide (CO2) is the

    most important anthropogenic GHG, and the global increases in CO2 concentration are due

    primarily to fossil fuel use and land use change (IPCC, 2007).

    The relationships between output and energy consumption, as well as output and

    environmental pollution, have been the subject of intense research over the past few decades.

    However, the empirical evidence remains controversial and ambiguous to date. Economic

    development is closely related to energy consumption since higher economic development is

    expected when more energy is consumed. However, it is also equally likely that more

    efficient use of energy (which could lead to a reduction in energy consumption) requires a

    higher level of economic development.

    Human activities are influencing the environment. Human activities, in particular those

    involving combustion of fossil fuels and biomass burning, produce GHG that affects the

    composition of the atmosphere and lead to the depletion of the stratospheric ozone layer. Land

    use change due to urbanization and forestry and agricultural activities is also affecting the

    physical and biological properties of the earth surface and subsequently affecting the regional

    and global climate (IPCC, 2001).

    The increase in GHG concentrations in the atmosphere affects processes and feedbacks in theclimate system. Qualitatively, an increase of atmospheric GHG concentrations will lead to an

    average increase of the temperature of the surface-troposphere system. In this respect, CO2 is

    the most important anthropogenic GHG. Increased CO2 emissions from fossil fuel use is

    certain to be the dominant influence on the trends in atmospheric CO2 concentration that

    eventually resulted in rising global temperatures and sea level (IPCC, 2005).

    The most significant increase of energy consumptions and CO2 emissions is taking place in

    cities, where rapidly expanding populations enjoy higher living standards and material

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    affluence (Fong et al., 2007a & 2007b; IGES, 2004). In the Malaysia context, due to recent

    thriving and prosperous in economy, urban population is expanding rapidly. Although this can

    bring about many conveniences on job opportunities, education and quality of life etc, it also

    implies that the risk of degradation of environmental quality will arise from human activities.

    With 0.4 per cent of the worlds population, Malaysias 27 million people accounted for 0.6

    per cent of the global carbon emissions. As a developing country, Malaysias carbon

    emissions growth is one of the fastest; it grew by 221 per cent from 1990 to 2004 (UNDP

    Human Development Report 2007/2008). Malaysias rapid rise in its carbon emissions is the

    result of robust expansion in its industrial and automotive sectors, the over dependence on

    fossil fuel as its TPES (Total Primary Energy Supply), unsustainable waste management and

    forest and grassland conversion. With a CO2 emission intensity of GDP of 1.198 million

    metric tonne (MT) / USD million (IMF & CDIAC, 2006); Malaysia has one of the highest

    carbon emission intensity of GDP in the world, indicated a low economy output to carbon

    emission. Malaysia had announced that it is taking a voluntary reduction of up to 40 per cent

    carbon emission intensity of GDP by the year 2020 compared to 2005 level at Copenhagen in

    2009 (Theseira, 2010). To reach the carbon emission reduction, substantial action has to be

    taken. This requires first and foremost a viable policy on climate change to achieve this goal.

    On a whole, economic planning framework in Malaysia should give more serious

    considerations on the issues of energy consumptions and CO2 emissions. Although there are

    some policies in the NPP (National Physical Plan) and NUP(National Urbanization Policy)

    indirectly favor energy conservation, there is still no measure that directly focuses on

    promoting energy conservation/efficiency and capping CO2 emission.

    2.Objectives

    1.To rationalize polluted sectors in order to reduce emissions and enhance alternative ways of

    energy generation

    2.To optimize utilization of less polluted energy resources to acheive sustainable economic

    development

    3. To promote balance economic development and cutting emission for economic stability

    4. To secure environmental quality and diversity for a high quality of life

    5. To disclose the sectoral emission contribution in economy

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    3. Literature Review

    The challenges faced by the developing countries are complicated because they need to meet

    the increasing energy demands for their economic growths at a competitive price whiledealing with the climate change issue. Typical to most developing countries, the rapid

    economic growth of Malaysia is mostly propelled by the growth in the industrial sector, which

    depends on the availability of cheap energy supply. As a result, the GDP growth is always

    positively correlated to the energy demand and this is proven to be true in Malaysia (Abdul

    Hamid et al., 2008). The country has announced that it is targeting an average annual GDP

    growth of 6% until 2020 to become a developed country and a high income nation according

    to World Bank classifications (Dharmender, 2009). However, the reserve of oil and gas,

    which have been the main sources of energy in Malaysia, is fast depleting. It is estimated that

    Malaysia will become a net oil importing country in 2013 (Gan and Li, 2008).

    To ensure the availability and security of energy to fuel the economic growth, Malaysia is

    actively looking for alternative sources of energy, especially for electricity generation. Coal,

    being among the most abundant and cheap energy sources worldwide, is constantly

    considered in the national energy policy (Abdul Hamid et al., 2008). However, this has raised

    much controversy because of its excessive GHG emissions, which is not consistent with the

    countrys commitment to cut down GHG emission intensity by 40% by 2020, compared wi th

    that of 2005 (Choi, 2009). Therefore, Malaysia is facing a tough challenge of balancing the

    needs to increase energy production at a competitive price for the economic growth and the

    needs to cut down GHG emissions.

    The relationship between output and pollution has also been extensively studied in the

    literature. Whether continued increase in national income brings greater harm to the

    environment is critical for the design of development strategies for developing economies.

    Most empirical studies in this subject mainly focus on testing the validity of the

    Environmental Kuznets Curve (EKC), which postulates that the relationship between

    economic development and the environment resembles an inverted U-curve. The findings of

    Hettige, Lucas, and Wheeler (1992), Cropper and Griffiths (1994), Selden and Song (1994),

    Grossman and Krueger (1995), and Martinez-Zarzoso and Bengochea-Morancho (2004) are

    consistent with the EKC hypothesis. However, increased national income level does not

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    necessarily warrant greater efforts to contain the emissions of pollutants. The empirical results

    of Shafik (1994) and Holtz-Eakin and Selden (1995) show that pollutant emissions are

    monotonically increasing with income levels.

    Gay and Proops (1993) have used a model based on the U.K. input-output tables for 1984, but

    at a higher level of aggregation. They have discussed the possibility of using the model to

    explore the effect of varying the balance between fossil fuel and other forms of electricity

    generation and of changing the composition of final demand for goods and services. Another

    paper by Korres (1996) measures the extension and the direction of structural and

    technological change for the Greece economy. The impact of structural and technological

    changes on sectoral gross output was computed by breaking down the total change into the

    part due to changes in input-output coefficients (technological change) and the part due to

    changes and composition of final demand.

    While, Lin and Chang (1996) uses the Divisia index approach to decompose emission

    changes of SO2, NOx and CO2 from major economic sectors in Taiwan during 1980 to 1992.

    Their study highlights the interrelationships between energy use and environmental quality,

    and provides insights for the policy making. The emission changes are decomposed into five

    components viz., pollution coefficient, fuel mix, energy intensity, economic growth and

    industrial structure. Of all components analyzed, economic growth had the largest positive

    effect on emission changes for Taiwans major economic sectors. Emissions of SO2 in

    industry and other sectors showed a decreasing trend due to fuel quality improvements and

    pollution control. However, NOx and CO2 emissions increased sharply in all sectors.

    Chang and Lin (1998) employed input-output structural decomposition analysis to examine

    emission trends and effects of industrial CO2 emission changes in Taiwan during 1981-1991.

    Results indicate that the primary factor for the increase of CO2 emission is the level of

    domestic final demand and exports. However, the effect of an increasing rate of added value

    is less obvious. On the other hand, the effects of a decreasing industrial CO2 intensity is a

    main reducing factor, next is the structure of domestic final demand and the rate of domestic

    production to intermediate input also has partial reducing effects for CO2 emission.

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    4.0 Input-output Research Model

    Malaysia is well recognized due to its rich natural heritage and abundant energy resources and

    their contribution to strong and continued development, there is also need increasingawareness about to safeguard the environment, to harmonize development and environmental

    goals and to incorporate the framework of sustainable development into mainstream

    development planning. As the magnitude and array of environmental problems become more

    complex and urgent, there is a need to find approaches and methodologies that can deal with

    these challenges effectively and efficiently.

    In our research we are going to use environmental input-output model in order to analyze the

    emission generation in different economic sectors. Several studies have applied input-output

    analysis to modify the Ecological Footprint framework, examples of which include Bicknell

    et al. (1998), Lenzen and Murray (2001), Ferng (2002), Wood and Lenzen (2003), Hubacek

    and Giljum (2003), McDonald and Patterson (2004) and McGregor et al. (2004a, 2004b).

    The basic Leontief input-output model is generally constructed from observed economic data

    for a specific geographic region (nation, state, county, etc.), concerning the activity of a group

    of industries that both produce goods (outputs) and consume goods from other industries

    (inputs) in the process of producing each industrys own output interindustry consumption.

    The data required to fulfil the input-output model consists in flows of products from each of

    the producing sectors to each of the purchasing sectors. These interindustry flows (or

    intersectoral) are measured for a particular time period (usually a year) and in monetary terms.

    4.1 Input-output Transaction Table

    Each producing sector within the economy has certain amount of output that may be used

    within the sector, sold as inputs to other producing sectors or sold for final demand to

    consumers. For example, electricity is sold to other sectors as input to production (an

    interindustry transaction) and also to consumers (a final demand sale). Usually the demand of

    these external units is generally determined by considerations that are relatively unrelated to

    the amount being produced in each of the units. When all purchases or expenditures by sector

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    are considered, total sector output is exactly equal to sector outlay. Such a table may be

    developed in as fine or as coarse detail as the available data permit and the purpose requires.

    Table 1Input-output transactions table

    4.2 Use of Input-Output Analysis to Trace Environmental Discharges

    The complexity of the interaction between human activities (through economic goods) and

    environmental systems has long been recognised. It is often argued that policy analysts do not

    sufficiently consider this complexity in their evaluation of policy options for environmental

    regulations. In this context, to develop the appropriate policy responses to prevent the various

    types and consequences of pollution, or other environmental burdens, requires the input of a

    vast array of expertise, a clear description of the current situation and accurate mechanisms to

    evaluate different options, focusing the desired output results.

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    Figure 1: Basic relationship between inputs and outputs of an economy and interpretation of

    environmental emissions

    It is intuitive that effective environmental decision-making requires, among other things,

    information about the consequences of alternative designs, available materials, manufacturing

    processes, product use pasterns and disposal. One of the most well known and common tools

    to provide this type of information is Life-Cycle Assessment (LCA) methodology (Ferro,

    1998). This methodology attempt to quantify the environmental implications of alternative

    products and processes tracing pollution discharges and resources use through the chain of

    producers and consumers. It involves quantification of the environmental burdens (inventory

    analysis), estimation of the impacts of these burdens on humans and nature (impact analysis),

    and identification of areas where improvements are possible (improvement analysis) (Horvath

    and Hendrickson, 1998).

    5. Expected Results and benefits

    The environmental input-output analysis can be prove a powerful methodology to calculate

    the greenhouse gas emissions associated with a certain change in the final output of the

    Malaysian economy. The usefulness of this framework relies on the fact that it is based on the

    national Input-Output tables provided regularly by the National Statistics Institute (INE) that

    can be easily used to evaluate any type of environmental burden or social impact, only

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    depending on the nature and quality of publicly available data.We are going to use

    Environmental Input- Output Analysis in order to estimate greenhouse gas emissions, making

    use of statistical information on economic sectors emissions quantified by the Energy

    department Malaysia. The usefulness of the methodology developed in this work, enforces the

    necessity of improving the National data gathering system to extend the input-output

    methodology to different types of environmental calculations. The quantitative and qualitative

    improvement of the data available will allow the inclusion of more detailed and extensive

    data, thus increasing the possible level of analysis and the quality of the results.

    Since this methodology is based on the national accounts, it stands on public and reliable

    economic data, ensuring credible results given that it guarantees the inclusion of all economic

    linkages. The method has also the advantage of being simple and easy to use and understand.

    This work provides the methodological knowledge and the inputs for decision-makers

    consciously decide upon the different options and results.

    6. Estimated Cost of Research

    COST TABLE

    PARTICULARS YEAR 1 YEAR 2 YEAR 3 TOTAL

    TRANSPORTATION RM 16,000 RM 16,000 RM 16,000 RM 48,000

    CONSULTATION RM 12,000 RM 12,000 RM 12,000 RM 36,000

    SEMINARS &

    CONFERENCES

    RM 6,000 RM 6,000 RM 6,000 RM 18,000

    MINOR

    MAINTANENECE

    RM 2,000 RM 2,000 RM 2,000 RM 6,000

    PRINTING RM 1,000 RM 1,000 RM 1,000 RM 3,000

    STATIONARY RM 500 RM 500 RM 500 RM 1,500

    TOTAL RM 37,500 RM 37,500 RM 37,500 RM 1,12,500

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    7. Gantt Chart

    GANTT CHART

    Year 2011 2012 2013

    ACTIVITIES/MONTHS J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

    LITERATURE REVIEW

    FINALIZING VARIABLES

    DESIGNING MODEL

    SELECTION OF SECTORS

    DATA COLLECTION

    DATA MANAGEMENT

    DATA ANALYSIS

    RESULT AND REPORT

    WRITING

    PROJECT COMPLETION

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